Industry reiterates its demand for a rate cut by RBI as IIP slips to 3.1%

The Dollar Business Bureau

As growth of country’s industrial production slipped to 3.1% in the month of April, India Inc reiterated its demand for a cut in interest rate by the Reserve Bank of India (RBI), stating that it was imperative to bolster growth as well as consumer demand.

Industry body ASSOCHAM said on Monday that the industry has been disappointed by the RBI’s status quo on the interest rates as there was a possibility for a cut in the key policy rate.

“It is unfortunate for the industry that while the government has taken steps to revive the demand by implementing reforms, RBI's stance to maintain the status quo has hit the expectations of the industry though there was a room for a rate cut,” said ASSOCHAM in a statement.

In its recent monetary policy review, the RBI had kept unchanged the repo rate for the fourth time at 6.25%.

The industry body emphasised on the need to create conducive atmosphere for investments, expansion of industrial production and capacity utilisation on an urgent basis.

According to the data released by the government on Monday, the factory production in April grew by 3.1% compared to the corresponding month last year, as per the revised Index of Industrial Production (IIP) index with 2011-12 as base year. The growth forecast for March 2017 was revised to 3.75% from 2.7%.

Federation of Indian Chambers of Commerce and Industry (FICCI) President Pankaj Patel said that overall the industrial output growth seems to be steadying and can pick up pace if the international demand is stable in the coming months. The industry looks forward to the upcoming review of the foreign trade policy (FTP) to further encourage exports.

“A more accommodative monetary policy with lower interest rate would stimulate consumer demand that would hedge any downside risk arising from exports,” he added.

ASSOCHAM prodded the government to come out with more effective measures for short-term growth revival, noting that there were risks to India’s economy in the form of uncertainty in global environment, such as increasing protectionism and a renewed slowdown in China’s economy.